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Tanker Solicitation Seeks Fair Competition, Best Value

By Donna MilesAmerican Forces Press Service

WASHINGTON, Feb. 24, 2010  The final request for proposals to solicit bids for a new aerial tanker was designed to promote fair, open competition that provides the best warfighting capability for the best value, Deputy Defense Secretary William J. Lynn III said here today.

Meanwhile, the process will serve as a model for the Defense Department’s acquisition reform effort, Lynn said, eliminating requirements added after the contract award that drive up costs and delay delivery.

Lynn joined Air Force Secretary Michael B. Donley and Ashton Carter, undersecretary of defense for acquisition, technology and logistics, in unveiling details of the solicitation for a new KC-X aerial tanker. The new tanker will replace the Air Force’s aging KC-135 Stratotanker fleet that refuels other aircraft in flight to extend their reach and warfighting capability.

The highly detailed request for proposals released today -- which includes 372 mandatory requirements and incorporates 230 mostly technical changes in response to comments on a draft document issued in September – stays true to three guiding principles, Lynn told reporters.

“This is going to be an objective completion. It is going to be fair, it is going to be open,” he said, recognizing the high stakes in the determination in terms of jobs as well as revenues and “buffeting” from both primary competitors, Boeing Co. and Northrop Grumman Corp.

“We are resisting that buffeting, and we are going to play this straight down the middle,” Lynn said.

The Defense Department has rejected going for a low-bid contract in favor of a “best-value competition” that considers other factors as well, the warfighting contribution and lifecycle costs among them.

“Price is very important,” Lynn emphasized, but will be weighed along with other variables during the selection process. “The reason you can be sure this is not a price shootout is it is actually possible to have a higher price and to win this competition,” he said.

Lynn expressed hope that the tanker selection process will serve as a flagship for the department’s broad acquisition reform agenda.

It’s highly detailed – with 10 times the mandatory requirements that were in the last bid proposal that was withdrawn almost immediately after being issued. Laying out all the requirements up front rather than tacking them on midstream, Lynn said, will guard against cost overruns and program delays.

The Air Force’s solid understanding of its requirements, along with the maturity of the technology involved and the contractors’ well-established industrial bases set the stage for what Lynn called another major acquisition reform initiative: fixed-price contracts.

“We can’t do fixed-price development in every case,” Lynn said, but he called the tanker solicitation the perfect opportunity do so.

Incorporating technical changes in response to 350 comments on the draft request for proposals, the final solicitation maintains the focus on providing critical military capability, Lynn said.

“Where we haven’t changed things is in the basic requirements of the airplane,” he said. “The warfighter has set out what they need. We think the 372 requirements that we’ve laid out will bring the Air Force the plane it needs to bring to the war fight on Day One.”

Ultimately, “this is about what the Air Mobility Command needs to meet the warfighting needs of the nation,” Lynn said. “We think that the structure in this RFP is going to get us that, and we’re going to proceed in that direction.”

The contractors vying for the contract, worth an estimated $35 billion, will have 75 days to submit their bids. The Defense Department will evaluate the proposals for 120 days, then the Air Force will award a contract in the mid-September timeframe, Lynn said.

He expressed hope for a “robust competition” that delivers “the best value for the taxpayer and the best airplane for the warfighter.”

Donley echoed that sentiment, expressing hope that both Boeing and Northrop Grumman will bid on what he called “a very strong RFP.”

“We believe that both offerors are in a position to win this competition,” Donely said. “We think both offerors can meet the mandatory requirements that we have laid out. And we hope and expect to have a good competition.”

Regardless of which contractor wins the contract, Carter said, the “clarity and precision” used in the solicitation will leave no one wondering how the decision was made.

“The source selection strategy is crystal clear,” he said. “Everybody will know, when a winner is picked, exactly why they won. And up front, both offerors know exactly what they need to do to win.”

Officials are hopeful this will eliminate the challenges and acrimony that have plagued the aerial tanker process to date.

The Air Force initially awarded the contract to build up to 179 new KC-45A tankers over the next decade to a consortium of Northrop Grumman and European Aeronautic Defense and Space Co., the parent company of Airbus.

The award drew a protest from rival Boeing. General Accounting Office auditors upheld the protest, identifying irregularities in the awarding of the contract.

The Air Force reopened the bidding process for the tanker contract in July 2008, but Gates announced two months later that he had decided to cancel it for fear it could not be awarded before he planned to leave his post along with the Bush administration.

“It has now become clear that the solicitation and award process cannot be accomplished by January [2009],” he said in testimony before the House Armed Services Committee. “Thus, I believe that rather than handing the next administration an incomplete and possibly contested process, we should cleanly defer this procurement to the next team.”

Still serving as defense secretary as part of the Obama administration, Gates is leading the team that will oversee the new tanker acquisition.